This is a list of terms designed to assist you while shopping or learning about insurance. It is not meant to be all inclusive, but should help with your understanding of the most common terms.
A – B – C – D – E – F – G – H – I – J – K – L – M – N – O – P – Q – R – S – T – U – V – W – X – Y – Z
A
Accidental Death and Dismemberment (AD&D) Rider
A supplement to many life insurance policies that provides an additional cash benefit to the insured or his/her beneficiaries if an accident causes either the death of the insured or causes the insured to lose any two limbs or the sight in both eyes.
Adjuster
A person who investigates and settles losses for an insurance carrier.
Allowed Amount
The maximum amount on which payment is based for covered health care services. This may be called “eligible expense”, “payment allowance”, or “negotiated rate.” If your provider charges more than the allowed amount, you may have to pay the difference. (See Balance Billing.)
Appeal
A request for your health insurer or plan to review a decision or a grievance again.
Agent
In insurance, the person authorized to represent the insurer in negotiating, servicing, or effecting insurance policies.
Annual Out-of-Pocket Maximum
A dollar amount set by the plan which puts a cap on the amount of money the insured must pay out of his or her own pocket for covered expenses over the course of a calendar year.
Annuity
A contract that provides for a series of periodic payments to be made or received at regular intervals.
Applicant
The party applying for an insurance policy.
Application
A printed form developed by an insurer that includes questions about the prospective insured and the desired insurance coverage and limits.
Assigned Risk
A risk insured through a pool of insurers and assigned to a specific insurer. These risks are generally considered undesirable by underwriters, but due to state law or otherwise, they must be insured.
Automatic Premium Loan
A provision in some life insurance policies that authorizes a policy loan using the cash value accumulated by the insurance policy to pay for past due premiums at the end of the grace period. This prevents a lapse of coverage.
B
Beneficiary
Any person, persons, or other entity designated to receive the policy benefits upon the death of the policyholder.
Binder
A written or oral contract issued temporarily to place insurance in force when it is not possible to issue a new policy or endorse the existing policy immediately. A binder is subject to the premium and all the terms of the policy to be issued.
Balance Billing
When a provider bills you for the difference between the provider’s charge and the allowed amount. For example, if the provider’s charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30. A preferred provider may not balance bill you for covered services.
Binding Receipt
A premium receipt acknowledging temporary insurance coverage immediately until the insurance company rejects the application or approves it and issues a policy.
Broker
A marketing specialist who represents insurance organizations and who deals with either agents or companies in arranging for the coverage required by the customer.
Buy-Sell Agreement
Agreement that a deceased business owner’s interest will be sold and purchased at a predetermined price or at a price according to a predetermined formula.
C
Calendar Year Deductible
The amount of health care expenses that the insured person must pay before insurance payments for covered eligible expenses.
Cancellation
The discontinuance of an insurance policy before its normal expiration date, either by the insured or the company.
Co-insurance
Your share of the cost of covered health care service, calculated as a percent (for example, 20%) of the allowed amount for the service. You pay co-insurance plus any deductibles you owe. For example, if the health insurance or plan’s allowed amount for an office visit is $100 and you’ve met your deductible, your co-insurance payment of 20% would be $20. The health insurance or plan pays the rest of the allowed amount.
Complications of Pregnancy
Conditions due to pregnancy. Labor and delivery that require medical care to prevent serious harm to the health of the mother or fetus. Morning sickness and a non-emergency cesarean section aren’t complications of pregnancy.
Co-Payment
A fixed amount (for example, $15) you pay for a covered health care service, usually when you receive the service. The amount can vary by the type of covered health care service.
Case Management
A utilization management technique that addresses the medical necessity of care as well as alternative treatments or solutions, especially when the patient is likely to require very expensive treatment.
Cash Value (cash surrender value)
The cash amount payable to a life insurance policyowner in the event of termination or cancellation of the policy before its maturity or the insured event.
Certificate of Insurance
A statement of coverage issued to an individual insured under a group insurance contract, outlining the insurance benefits and principal provisions applicable to the member.
Claim
A person’s request for payment from an insurer for a loss covered by the insurance policy.
COBRA (Consolidated Omnibus Budget Reconciliation Act)
COBRA requires organizations with twenty or more employees to offer the continuation of group health benefits (Medical, Dental, Vision, and Medical Reimbursement Account) to employees (and covered dependents) upon experiencing a “Qualifying Event.”
Employers are required to provide initial COBRA notification to covered employees and dependents, a letter detailing an individual’s rights upon experiencing a “qualifying event,” and an explanation of the conversion privilege. The legislation defines the following six situations as “Qualifying Events” that require COBRA continuation:
- Termination of Employment
- Reduction of Work Hours
- Employee’s Death
- Employee’s Divorce (or legal separation in some states)
- Medicare Entitlement
- Change in “Dependent” Status
Coinsurance Provision
A specified percentage of the cost of treatment the insured is required to pay for all covered medical expenses remaining after the policy’s deductible has been met.
Commission
The amount of money, usually a percentage of the premiums that is paid to an insurance agent for selling an insurance policy.
Conditions
The part of your insurance policy that states the obligations of the person insured and those of the insurance company.
Contingent Beneficiary
In a life insurance policy, the person designated to receive the policy benefits if the primary beneficiary dies before the insured.
Contract
A legally enforceable agreement between two or more parties.
Conversion Privilege
The right to convert or change insurance coverage from an individual term insurance policy to an individual whole life insurance policy.
Convertible Term Life Insurance
A type of term life insurance that offers the policyowner the option to exchange the term policy for a form of permanent insurance.
Copay
The fee you pay for certain medical services or for each prescription. For example, you may pay $20 for an office visit or $10 to fill a prescription and the health plan covers the balance of the charges. (1) A fee that many insurance plans require an insured to pay for certain medical services (such as a physician’s office visit). (2) An amount that the insured must pay toward the cost of each prescription under a prescription drug plan.
Creditable Coverage
The pre-existing condition exclusion is reduced one month for every month that a person had coverage in a previous qualifying plan as long as the gap in coverage between the previous plan and the new plan is 63 days or less.
D
Declination
The insurer’s refusal to insure an individual after careful evaluation of the application for insurance and any other pertinent factors.
Deductible
The amount you owe for health care services your health insurance or plan covers before your health insurance or plan begins to pay. For example, if your deductible is $1,000 your plan won’t pay anything until you’ve met your $1,000 deductible for covered health care services subject to the deductible. The deductible may not apply to all services.
Durable Medical Equipment (DME)
Equipment and supplies ordered by a health care provider for everyday or extended use. Coverage for DME may include oxygen equipment, wheelchairs, crutches or blood testing strips for diabetics.
Dependent
A person for whom the insured has some legal obligation to. For most plans, it is the insured’s spouse and/or children. Some plans also allow non-traditional spousal relationships (significant other, life-partner, etc.) to be considered a dependent with some additional certifying paperwork.
Double Indemnity
A provision in a life insurance policy, subject to specified conditions and exclusions, under the terms of which double the face amount of the policy is payable if the death of the insured is the result of an accident. In general, the conditions are that the insured’s death occurs prior to a specified age and results from bodily injury effected solely through external, violent and accidental means independently and exclusively of all other causes, within 60 or 90 days after such injury.
E
Emergency Room Visit
A visit to a hospital for treatment of an accidental injury or for emergency medical care. To qualify as an emergency, the symptoms must be sudden, severe and require immediate medical attention. Some states judge emergencies by the “prudent layperson” law, meaning that the health plan must cover a trip to the emergency room “if a prudent layperson, acting reasonably, would have believed that an emergency medical condition existed.” Keep in mind that some plans won’t cover a trip to the emergency room if the symptoms appeared more than 24 hours earlier.
Endorsement
Attachment or addendum to an insurance policy; an endorsement changes the contract’s original terms.
Emergency Medical Transportation
Ambulance services for an emergency medical condition.
Emergency Services
Evaluation of an emergency medical condition and treatment to keep the condition from getting worse.
Excluded Services
Health care services that your health insurance or plan doesn’t pay for or cover.
Exclusions and Limitations
Conditions, situations and services not covered by the health plan.
Extended Term Life Insurance
A nonforfeiture benefit under which the net cash value of the policy is used to purchase term insurance for the amount of coverage available under the original policy.
F
Face Amount
The amount stated in the life insurance policy as the death benefit.
G
Grace Period
The specified length of time, after a Life or Health premium payment is due in which the insured may make the payment and keep the policy in force. (Usually 30 days.)
Group Health Insurance
An insurance plan designed for a group, such as employees of a single employer. Insurance is provided to them under a single policy.
Guaranteed Renewable Policy
A health insurance policy that the insurer is required to renew – as long as premiums are paid – at least until the insured attains the age limit specified in the policy, or the policy is cancelled by the insured. The insurer may increase the premium rate for any class of guaranteed renewable policies.
Grievance
A complaint that you communicate to your health insurer or plan.
Guaranty Association
Established by each state to support insurers and protect consumers in the case of insurer insolvency, guaranty associations are funded by insurers through assessments.
H
HIPPA – Health Insurance Portability and Accountability Act of 1996
Under this federal law (known as HIPAA), group health plans cannot deny coverage based solely on an individual’s health status. This law also gives employees who change or lose their jobs better access to health coverage, guarantees renewability and availability to certain employees and limits exclusions for pre-existing conditions. For example, under this law, group health plans must credit any employee the amount of time that they spent on any health plan prior to the new plan, which is known as “prior credible coverage.” A pre-existing condition will be covered without a waiting period when an employee joins a new group plan if the employee has been insured for the previous 12 months with credible health insurance, with no lapse in coverage of 63 days or more. This means that if an employee has been insured for 12 months or more, the employee will be able to go from one job to another and his or her pre-existing coverage will remain intact – without additional waiting periods. However, if an employee has a pre-existing condition and was not covered previously for 12 months before joining a new plan, the longest the employee will have to wait for their pre-existing coverage to be covered is 12 months.
Habilitation Services
Health care services that help a person keep, learn or improve skills and functioning for daily living. Examples include therapy for a child who isn’t walking or talking at the expected age. These services may include physical and occupational therapy, speech-language pathology and other services for people with disabilities in a variety of inpatient and/or outpatient settings.
Health Insurance
A contract that requires your health insurer to pay some or all of your health care costs in exchange for a premium.
Home Health Care
Health care services a person receives at home.
Hospice Service
Services to provide comfort and support for persons in the last stages of a terminal illness for their families.
Hospitalization
Care in a hospital that requires admission as an impatient and usually requires an overnight stay. An overnight stay for observation could be outpatient care.
HMO (Health Maintenance Organization)
A health care financing and delivery system that provides comprehensive health care for subscribing members in a particular geographic area using managed care techniques. Most HMOs require that you only utilize physicians within their network, often going so far as to require you to choose a primary care physician who directs most courses of your treatment.
I
Indemnification
Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.
Indemnity
Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position as existed before the loss.
In-network Co-insurance
The percent (for example, 20%) you pay of the allowed amount for covered health care services to providers who contract with your health insurance or plan. In-network co-insurance usually cost you less than out-of-network co-insurance.
In-network Co-payment
A fixed amount (for example $15) you pay for covered health care services to providers who contract with your health Insurance or plan. In network co-payments usually are less than out-of-network co-payments.
Insolvent
Having insufficient financial resources (assets) to meet financial obligations (liabilities).
Incontestable Clause
A life insurance policy wording that provides a time limit (e.g., two years) on the insurer’s right to dispute a policy’s validity based on material misstatements in the application.
Insurance Company
An organization that has been chartered by a governmental entity to transact the business of insurance.
Insured
A person or organization covered by an insurance policy, including the “named insured” and any other parties for whom protection is provided under the policy terms.
Insurer
The party to the insurance contract who promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public.
Irrevocable Beneficiary
A named beneficiary whose rights to life insurance policy proceeds cannot be canceled or changed by the policyowner unless the beneficiary consents.
J
K
Key Employee
Insurance protection of a business against financial loss caused by the death or disablement of a vital member of the company, usually individuals possessing special managerial or technical skill or expertise. Also called key executive insurance.
L
Lapse
Termination of a policy due to nonpayment of premiums.
Liability
A legal obligation to compensate a person harmed by one’s acts or omissions.
Life Insurance
Insurance that pays a specified sum of money to designated beneficiaries if the insured person dies during the policy term.
Lifetime Maximum
The maximum amount of money a plan will pay towards healthcare services over the course of the insured’s lifetime.
Living Benefits
Living benefit options for term life include: Accelerated death benefits. This living benefit pays out a portion of your term life policy if you ever face a terminal illness. This gives you needed cash to cover medical expenses, debt and more.
Loss
The happening of the event for which insurance pays.
Loss Expense – Allocated
Handling expenses, such as legal or independent adjuster fees, paid by an insurance company in settling a claim which can be definitely charged to that particular claim.
Loss Expense – Unallocated
Salaries and other expenses incurred in connection with the operation of a claim department of an insurance carrier which cannot be charged to individual claims.
M
Medical Payments Coverage
Medical and funeral expense coverage for bodily injuries sustained from or while occupying an insured vehicle, regardless of the insured’s negligence.
Medically Necessary
Health care services or supplies needed to prevent, diagnose or treat an illness, condition, disease or its symptoms and that meet accepted standards of medicine.
Misrepresentation
Act of making, issuing, circulating or causing to be issued or circulated an estimate, an illustration, a circular or a statement of any kind that does not represent the correct policy terms, dividends or share of surplus or the name or title for any policy or class of policies that does not in fact reflect its true nature.
N
Negligence
Failure to use a generally acceptable level of care and caution.
Network
The facilities, providers and suppliers your health insurer or plan has contracted with to provide health care services.
Non-Preferred Provider
A provider who doesn’t have a contract with your health insurer or plan to provide services to you. You’ll pay more to see a non-preferred provider. Check your policy to see if you can go to all providers who have contracted with your health insurance or plan, or if your health insurance or plan has a “tiered” network and you must pay extra to see some providers.
Non-Formulary Drugs
Non-formulary drugs often require a higher copayment. Non-formulary drugs are those that have not yet been reviewed or have been denied formulary status, typically because they offer no extra benefit over the drugs already on a plan’s formulary list.
O
Offer and Acceptance
The offer may be made by the applicant by signing the application, paying the first premium and, if necessary, submitting to physical examination. Policy issuance, as applied for, constitutes acceptance by the company. Or the offer may be made by the company when no premium payment is submitted with the application. Premium payment on the offered policy then constitutes acceptance by the applicant.
Out-of-Network
Health care services received outside the HMO, POS or PPO network.
Out-of-network Co-Insurance
The percent (for example, 40%) you pay of the allowed amount for covered health care services to providers who do not contract with your health insurance or plan. Out-of-network co-insurance usually cost you more than in-network co-insurance.
Out-Of-Pocket Limit
The most you pay during a policy period (usually a year) before your health insurance or plan begins to pay 100% of the allowed amount. This limit never includes your premium, balance-billed charges or health care your health insurance or plan doesn’t cover. Some health insurance or plans don’t cover all of your co-payments, deductibles, co-insurance payments, out-of-network payments or other expenses toward this limit.
Out-of-Pocket Expense
Any medical care costs not covered by insurance, which must be paid by the insured.
P
Paid-up Policy
An in-force life insurance policy for which no further premium payments are required.
Physician Services
Health care services a licensed medical physician (M.D. -Medical Doctor or D.O. – Doctor of Osteopathic Medicine) provides or coordinates.
Plan
A benefit your employer, union or other group sponsor provides to you to pay for your health care services.
Preauthorization
A decision by your health insurer or plan that a health care service, treatment plan, prescription drug or durable medical equipment is medically necessary. Sometimes called prior authorization, prior approval or precertification. Your health insurance or plan may require preauthorization for certain services before you receive them, except in an emergency. Preauthorization isn’t a promise your health insurance or plan will cover the cost.
Preferred Provider
A provider who has a contract with your health insurer or plan to provide service to you at a discount. Check your policy to see if you can see all preferred providers or if your health insurer plan has a “tiered” network and you must pay extra to see some providers. Your health insurance plan may have preferred providers who are also “participation “ provides. Participating providers also contract with your health insurance or plan. Tu the discount may not be as great, and you may have to pay more.
Premium
The amount that must be paid for your health insurance or plan. You and/or your employer usually pay it monthly, quarterly, or yearly.
Prescription Drug Coverage
Health insurance or plan that helps pay for prescription drugs and medications.
Prescription Drugs
Drugs and medications that by law require a prescription.
Primary Care Physician
A physician (M.D. – Medical Doctor or M.O.-Doctor of Osteopathic Medicine) who directly provides or coordinates a range of health care services for a patient.
Provider
A physician (M.D. – Medical Doctor or M.O.-Doctor of Osteopathic Medicine) , health care professional or health care facility licensed, certified or accredited as require by the state law.
Permanent Insurance
A general term for ordinary life and whole life insurance policies that remain in effect as long as their premiums are paid.
Point-of-Service Plan
An HMO (see Health Maintenance Organization) plan that also incorporates an indemnity plan option allowing members to obtain medical care from providers outside of the HMO network at a reduced benefit and at greater out-of-pocket expense.
Policy
The written forms that make up the insurance contract between an insured and insurer. A policy includes the terms and conditions of the coverage, the perils insured or excluded, etc.
Policy Declarations
The part of the insurance contract that lists basic underwriting information, including the insured’s name, address and description of insured locations as well as policy limits.
Policy Limits
The maximum amount an insured may collect or for which an insured is protected, under the terms of the policy.
Policy Loan
A loan from a life insurer to the owner of a policy that has a cash value.
Policyholder
The person who buys insurance.
Policyowner
An individual with an ownership interest in an insurance policy.
Policy Period
The amount of time an insurance contract or policy lasts.
PPO (Preferred Provider Organization)
An organization where providers are under contract to an insurance company or health plan to provide care at a discounted or negotiated rate. Typically, you can see any doctor in the PPO network without requiring special approval, and you usually do not need to choose a primary care physician. Most PPOs will also allow you to seek care outside of the PPO network; however, the benefits are usually reduced and the insured has a greater out-of-pocket expense.
Pre-Existing Condition
(1) According to most individual health insurance policies, an injury that occurred or a sickness that first appeared or manifested itself before the policy was issued and that was not disclosed on the application for insurance. (2) According to most group health insurance policies, a condition (excluding pregnancy) for which an individual received medical care during the three months to six month immediately prior to the enrollment of his coverage.
Pre-Existing Conditions Provision
A health insurance policy provision stating that benefits will not be paid for any illness and/or condition that existed prior to one becoming an insured under the particular health plan in question, until the insured has been covered under the policy for a specified period.
Preferred Risk
A risk whose physical condition, occupation, mode of living and other characteristics indicate a prospect for longevity superior to that of the average longevity of unimpaired lives of the same age.
Premium
The price for insurance coverage as described in the insurance policy for a specific period of time.
Primary Beneficiary
The person designated as the first to receive the proceeds of a life insurance policy upon the death of the insured.
Primary Care Physician (PCP)
A general or family practitioner who serves as the insured’s personal physician and first contact with a managed care system. The PCP will usually direct the course of your treatment and/or refer you to other doctors and/or specialists in the network.
Policyholder
The person who buys insurance.
Probationary Period
The length of time that a new group member must wait before becoming eligible to enroll in a group insurance plan.
Proof of Loss
A sworn statement that usually must be furnished by the insured to an insurer before any loss under a policy may be paid.
Protection Amount
The face amount of a life insurance policy, or amount of money that will be paid to a beneficiary upon the death of an insured. This amount will be reduced by the amount of any outstanding policy loan.
Q
R
Rate
The pricing factor upon which the insurance buyer’s premium is based.
Rated Policy
Sometimes called an “extra-risk” policy, an insurance policy issued at a higher-than-standard premium rate to cover the extra risk where, for example, an insured has had a DUI (Driving Under the Influence) or other traffic violations.
Rebating
Giving any valuable consideration, usually all or part of the commission, to the prospect or insured as an inducement to buy or renew. Insurance rebating is prohibited by law.
Reimbursement
The payment of an amount of money by an insurance policy for a covered loss.
Rehabilitation Services
Health care services that help a person keep, get back or improve skills and functioning for daily living that have been lost or impaired because a person was sick, hurt or disabled. These services may include physical and occupational therapy, speech-language pathology and psychiatric rehabilitation services in a variety of inpatient and/or outpatient settings.
Reinstatement
The process by which a life insurance company puts back in force a policy that has lapsed or has been canceled for nonpayment of premium.
Renewable Term Life Insurance
A renewable life policy permits the owner of the policy to automatically renew the policy beyond its original term by acceptance of a premium for a new policy term without evidence of insurability.
Revocable Beneficiary
A life insurance policy whose designation as beneficiary can be revoked or changed by the policyowner at any time prior to the insured’s death.
Rider
An addition to an insurance policy that becomes a part of the contract.
Risk
The possibility or chance of loss or injury.
S
Settlement
An agreement between a claimant or beneficiary to an insurance policy and the insurance company regarding the amount and method of a claim or benefit payment.
Standard Industrial Classification (SIC)
The Standard Industrial Classification (SIC) system is a series of number codes that attempts to classify all business establishments by the types of products or services they make available. Establishments engaged in the same activity, whatever their size or type of ownership, are assigned the same SIC code. These definitions are important for standardization. Insurance companies use SIC codes to determine specific rates for various industries. HealthInsurance.com uses these codes to ensure that you receive the best possible rate for your occupation.
Standard Risk
A person who, according to a company’s underwriting standards, is entitled to purchase insurance protection without extra rating or special restrictions.
Skilled Nursing Care
Services from licensed nurses in your own home or in a nursing home. Skilled care services are from technicians and therapists in your own home or in a nursing home.
Specialist
A physician specialist focuses on a specific area of medicine or a group of patients to diagnose, manage, prevent or treat certain types of symptoms and conditions. A non-physician specialist is a provider who has more training in a specific area of health care.
Standard Risk Rate
The risk category that is composed of proposed insureds who have a likelihood of loss that is not significantly greater than average.
Stop-Loss Provision
A major medical policy provision under which the insurer will pay 100 percent of the insured’s eligible medical expenses after the insured has incurred a specified amount of out-of-pocket expenses in deductible and coinsurance payments.
T
Term Insurance
Life insurance under which the benefit is payable only if the insured dies during a specified period. If the insured survives beyond that period, coverage ceases. This type of policy does not build up any cash or nonforfeiture values.
U
Underwriter
(a) A company that receives the premiums and accepts responsibility for the fulfillment of the policy contract; (b) the company employee who decides whether or not the company should assume a particular risk; (c) the agent who sells the policy.
Underwriting
The process of reviewing applications for coverage. Applications that are accepted are then classified by the underwriter according to the type and degree of risk.
Unilateral
A distinguishing characteristic of a life insurance contract in that it is only the insurance company that pledges anything. The policyowner does not even promise to pay premiums; therefore, it is really a one-sided contract favoring the policyowner.
UCR (Usual, Customary and Reasonable)
The amount paid for a medical service in a geographic area based on what providers in the area usually charge for the same or similar medical service. The UCR amount sometimes is used to determine the allowed amount.
Urgent Care
Care for an illness, injury or condition serious enough that a reasonable person would seek care right away, but not so severe as to require emergency room care.
Uninsurable Risk
One not acceptable for insurance due to excessive risk.
Universal Life
Flexible premium, two-part contract containing renewable term insurance and a cash value account that generally earns interest at a higher rate than a traditional policy. The interest rate varies. Premiums are deposited in the cash value accounts after the company deducts its fee and a monthly cost for the term coverage.
Urgent Care
Urgent care is appropriate when a medical urgency arises which necessitates immediate care, but has not reached the level of extreme emergency. Most managed care plans require you to seek urgent care at a participating urgent care facility or hospital.
Usual, Customary and Reasonable Fee
The maximum dollar amount of a covered expense that is considered eligible for reimbursement under a major medical policy.
V
W
Waiver
An agreement attached to a policy which exempts from coverage certain disabilities or injuries that otherwise would be covered by the policy.